tv Nightly Business Report PBS March 16, 2011 1:00am-1:30am PDT
>> susie: japan's unfolding nuclear crisis derails markets around the globe. the dow tumbled almost 300 points at the open. >> the global markets were very anxious. it was an absolute... i wouldn't call it a flight to safety; it was a flight to cash. it looked like people were desperate for liquidity. >> susie: market strategist mike holland and economist diane swonk weigh in with their analysis. you're watching "nightly business report" for tuesday, march 15. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. my colleague tom hudson is off. japan is on high alert tonight as the country responds to yet another explosion at the daichi nuclear power plant. japan's prime minister warned of substantial radiation leaks. the ongoing threat of radioactive fallout led to a global market sell-off today. we have complete coverage, beginning in tokyo with correspondent lucy craft. when i talked with her a short while ago, i began by asking what is the japanese government telling people.
>> what we are hearing is there is the continuing troubles at the reactors. there are a total of six reactors at this power plant. and four of them have been having malfunctions at various times. there have been explosions, hydrogen explosions, and there was a fire at the number four reactor yesterday. and we're hearing now -- i'm just looking at the headlines now, and it is the middle of the night here -- reactors five and six may be -- we may have the same problems with those as well. people further south, we're told that the radiation emissions are not harmful to human health. this isn't terribly reassuring, but, still, we're told by the government and a number of experts that there isn't anything to worry about yet. >> but, lucy, how fearful are people about these radiation levels spreading? >> people are shell-shocked, i'll say
that, first of all. getting over the fact we had -- one expert said this once every thousand year event, a combination of a massive earthquake and tsunami, and add into the mix this nuclear power catastrophe. it's almost too much to get your mind around. >> tell us a little about supplies. what is day to day life like in terms of food and water and electricity, and just getting around town? >> the situation in northeastern japan is quite desperate. although, my son, who has just come back to us from sendai, closer in to the city, told us infrastructure is starting to be restored. you walk into tokyo, and there are no neon lights, and there much fewer people walking around the town. it is a bizarre, unsettling atmosphere. >> are people in an
orderly fashion, or are they panicky? >> i would say in a lot of senses, this is japanese population's finest hour. in tokyo, as i mentioned earlier, there is a great frustration and anxiety level, but there are also a lot of people saying, you know, we have to pull ourselves together. >> you can hear my complete conversation with lucy, including more on her son's ordeal, on our website, nbron meanwhile, concerns about those damaged nuclear reactors in japan spooked investor confidence, and stock markets around the world sold off. here in the u.s., the panic- selling swept through wall street, but the major averages rebounded by the close of trading. the dow tumbled 137 points, reversing a loss of nearly 300 points earlier in the session. the nasdaq fell 33, and the s&p was down 15. so what happens now? erika miller reports.
>> reporter: the moment the opening bell rang on wall street, fear gripped the stock market. trader art cashin says the disaster in japan prompted many investors to dump their holdings at any price. >> when you can't sell what you want to sell, you sell whatever you can-- sometimes, your grandmother's necklace. you don't like to sell that, but if that's the only thing that gets you money, you have to do that. >> reporter: the dow's decline was serious, but the drop was far worse in japan. the nikkei lost more than 10%. most european markets also fell. the question for investors is what to do now? is the stock market overreacting to the crisis in japan, or does it pose a major threat to global growth? market strategist alec young says the answer depends on the extent of the damage to japan's nuclear plants. >> unless we are really looking at a repeat of chernobyl, where we had a major nuclear meltdown and radiation spreads throughout tokyo, and it really takes their economy offline for a very long period of time, i think anything short of that has already been priced in.
>> reporter: but there are also concerns about disruptions to global economic supply lines. japan is home to many of the world's biggest manufacturing and electronics companies. instead of selling those stocks, some strategists say "buy them." >> i think long-term investors would be rewarded, looking at the best of breed type of companies-- big export manufacturers in the auto space, in the electronics space. sure, there's going to be some pain as a result of this event, but if you look at what's happened in the market in japan, much of that pain has already been priced in. >> reporter: but there are plenty of others who believe stocks are ripe for a major pullback. after all, the market has basically gone up in a straight line since september. the situation in japan comes on top of other worries for investors, including the possibility of a disruption to oil supplies. >> then, you have things we kind of passed by, like libya. that's still out there. and the saudi arabians have sent
troops into bahrain. so the middle east could blow up at a moment's notice. we could have a sudden rush in oil. >> reporter: nobody knows how stocks will open tomorrow, but it's safe to say investors here will be watching what happens overseas tonight. erika miller, "nightly business report," new york. >> susie: here are the stories in tonight's "n.b.r. newswheel." upbeat words from the federal reserve today. policymakers say the u.s. economic recovery is on "firmer footing" and conditions in the job market are beginning to improve. the fed made no mention of the events unfolding in japan, but confirmed its commitment to its $600 billion program to buy u.s. government bonds. we'll talk more about the fed with economist diane swonk and market strategist mike holland in just a moment. the u.s. slapped more sanctions on libya's government as moammar qaddafi continued his crackdown on the opposition.
the treasury has frozen assets linked to libya's foreign minister. it also banned business with 16 companies the libyan government owns or controls. and goldman sachs considered buying troubled insurer a.i.g. three years ago, according to wire tapped phone conversations. that audio tape was played for jurors today in the largest hedge fund insider trading case. raj rajaratnam, the accused founder of the galleon group hedge fund, was heard getting the scoop on possible purchases by goldman. his conversation was with a former goldman sachs director. now, rajaratnam denies any wrongdoing. he's charged with 14 counts of conspiracy and securities fraud. still ahead tonight-- why focusing on boosting productivity at the nation's colleges could help the american workforce. more now on japan, the markets, and fed. joining us-- diane swonk, chief economist at mesirow financial; and mike holland of holland and
company. hi, diane, hi, mike. nice to have you with us. >> hi, susie. >> good to be here. >> susie: diane, let me begin with you. what's your take on japan. even though we don't have the acknowledge on the scope. do you think it will have an impact on the global economic recovery? >> there no question it will have an impact. the reaction to natural gas disasters always tends to be heavier. japan is not haiti. we'll see rebuild -- an interruption in economic activity, and some of the interruptions will be filled, like exports to china, by places to europe. and as japan rebuilds, last time with the cobi earthquake, we saw a lot of caterpillar equipment go to japan. and that's what happens, you have a loss in wealth,
and that transfer of wealth to other countries as they rebuild. we don't know -- i think it is very important that the fed did not mention japan today because there is more that is unknown about what the effects of japan are going to be, than what is known. the fed didn't want to add anything that would calm markets in japan too early or spark further panic. so they stayed away from it very deliberately, and i think that was very important. >> susie: we'll get back to the fed in just a moment, but i want to get mike to weigh in on the whole japan situation, and particularly the market reaction. were you surprised about the big turnaround in the market, mike? >> no. i think what is going on, susie, is just what diane is talking about. when people finally got a sense it was not going to be a run-away radioactive meltdown, there were some conflicting comments coming out of japan, but overall they indicated we weren't going to have a major radioactive effect, at least for now.
earlier in diane's comment, she mentioned it as a caveat. that is the radioactive effect -- we simply don't know that that's the most significant thing the markets will trade on very short-term. longer term, this is probably something that will end up to a net positive for the japan economy. after all the human toll is such an awful thing, but the net effect could be positive a few years out. right now the markets will trade on radioactive rumors and news. >> susie: right. mike, a lot of investors thought the best thing to do was go to cash. is that the best strategy in this environment? >> no. susie, usually the best thing to do is stand still and wait for the dust to settle. don't just do something. stand there is a mantra i learned a long time ago. if you're spread across
asset categories, you probably should wait, in this case, for the radioactive dust to settle. >> susie: diane, let me pick up with what you were saying about the fed and japan. and the message is the u.s. economy is in great shape, and the japanese situation is not a threat to the u.s. economy? is that the message? >> no. i think they stayed away from the japanese situation deliberately because we don't know what the effect will be for the global economy in its entirety, positive or negative. they didn't say the u.s. economy is in great shape. they said the economy is improving. but not enough to meet our dual mandate. they made a specific point to do a nod to those who are hawkish. we understand oil prices have gone up, but we see it as a transitory event. in a economy with so many con traints on the u.s. consumer, it could be damaging in itself.
it was a unanimous vote. i'm not sure it would have been unanimous if maybe the events in japan and what was going on in the middle east hadn't occurred. we saw a lot of hawks disconcerned. but for now, this sidelined them, and they said we'll talk about it, but we're going to vote unanimously. >> susie: we just have about 30 seconds left, mike. certainly this is a bad situation from the human tragedy, as well as the economic tragedy. any good going to come out of this? >> yeah. i think it is possible -- history is a guide to countries be how they react to things. japan's history is a very positive one when it comes to a national agenda to do something. i think in this case, rebuilding will be something a couple of years from now. it may have turned out to be -- after the awful human toll, a very salutary economic event. >> susie: we'll leave it on that note for now. thank you so much, mike
and diane. glad to have you on the program tonight. >> thank you. >> thank you. >> susie: and we've been speaking to diane swonk, and mike holland of holland and company. >> susie: fears of an escalating nuclear crisis in japan pushed stocks into the "red zone" today. all of the dow components were in the red, except for chevron, which rose slightly. let's take a look in tonight's "market focus."
to get a feel for the world market reaction to the japanese crisis, let's take a look at how some country-specific etfs fared today. the japan etf ended off just a fraction, despite the nikkei losing over 10%. this german etf tumbled 3%, tracking the german market sell- off. the honk kong etf off more than 2%, and the singapore etf down sharply, off 3%. some investors opting for cash today, selling off their holdings in gold, long considered a safe haven. april gold futures skidded $32 to $1,392 an ounce, a drop of more than 2%. investors also took profits in oil. in new york trading, april
futures fell $4 to $97 a barrel. that was the biggest one-day drop in nearly five months. s for stocks, utilities and information technology stocks led the selling. yahoo! was the s&p 500's weakest member, down almost 6%. shares had been trending higher on speculation the company was looking at selling its stake in yahoo japan. analysts now believe there's little chance of a deal getting done. shares are now close to where they started the month, around $16 apiece. also under heavy selling pressure-- aflac. the life insurer does big business in japan. sellers turning a deaf ear to the company's insistence that earnings will not take a meaningful hit from the disaster. aflac's c.e.o. thinks claim costs will be manageable. those comments unable to cushion the sell-off. aflac stock still fell almost 6% to a five-month low. concerns over potential claims from japan hit several insurance stocks. shares in hartford and metlife and prudential testing three-month lows. the dow's weakest stock today-- intel. analysts at nomura securities
raising red flags about weak p.c. demand. they cut its rating on intel from buy to neutral. and finally, netflix was the standout to the upside. analysts at goldman sachs setting a $300 per share price target. netflix shares spiked almost 8%, or $15.91 to close at $217.11. a report from trade group n.p.d. shows netflix has a sizable lead in market share for movie downloads. and that's tonight's "market focus."
the u.s. government is open for business-- at least, for another few weeks. the house of representatives okayed today a plan to keep the feds operating through april 8. that extension cuts $6 billion from the budget. but the house and senate are still fighting over a long-term spending deal. house speaker john boehner wants to bring fiscal responsibility back to washington. >> why can't the senate show us what they're capable of producing? i don't know what that number is, and when we get that number, we'll have a better opportunity to have real negotiations in a real conference on cutting spending, reducing uncertainty, and creating a better environment for job creation in the country. >> susie: although it's not clear where the two chambers
will compromise, boehner hopes a long-term spending deal will come soon. here's what we're watching for tomorrow: we'll get an update on housing and inflation from the february reports on housing starts and producer prices. also, the weekly updates on mortgage applications and crude oil and gasoline inventories. and as japan's nuclear crisis raises worries around the globe, we'll talk with nuclear energy giant areva about safety concerns for the industry. coffee chain starbucks is reportedly talking with rival peet's coffee and tea about a possible takeover. rumors about the two companies have been floating around wall street for months. last week, starbucks made a deal with green mountain coffee roasters to sell its ground beans for those keurig single- cup brewers. analysts say if starbucks were to buy peet's, it could double or triple the size of that business over the next few years. it looks like goldman sachs could soon be doing more business in russia.
russian president dmitry medvedev met with goldman chief lloyd blankfein in moscow today. the topic-- goldman's possible participation in a direct investment fund aimed at attracting foreign capital to russia. in the past, investors stayed away from russia because of rampant government corruption and red tape.
when it comes to education, states should pay more attention to productivity. so says tonight's commentator, jamie merisotis, president and c.e.o. of the lumina foundation. >> america is home to some of the most productive and successful businesses in the world. recent government data shows that u.s. productivity is at the highest level in many years. but one place where productivity is lagging is in the hallowed halls of our great colleges and universities. now, productivity may not be a word you automatically associate with higher education. and yet, productivity is consistent with the loftier goals of academia. higher education productivity is about making the system more efficient, more innovative, and more cost-effective. we need a more productive higher education system because the u.s. needs a lot more college- qualified people to power our economy. and research shows that the public wants this.
some states are working hard to increase productivity by paying for results, embracing new course and program delivery models, and making campus operations much more efficient. but the work must continue, because one thing we know for sure is that if companies, or colleges, don't meet the challenge, competitors will find openings and take advantage of them. and that would make a less productive, and less prosperous, nation for all of us. i'm jamie merisotis. >> susie: just a reminder: you can find us online at nbronpbs.org. there you can comment on our blog and see the latest business headlines. or you can follow us on twitter at "biz rpt", or my personal feed at "s-gharib-underscore-nbr". we're also on facebook. friend us at "bzrpt." finally, we've seen the devastation from the quake and tsunami in japan, and we all want to help. the federal trade commission wants to help, too, making sure
you're not ripped off by a fake charity. the agency is warning consumers to be careful if they get emergency appeals by emails, in a phone call, or on social networking sites. before donating any money, be sure the charity is legit, don't give large cash gifts, and get a receipt. many large charities are now running japanese relief efforts, including the red cross and unicef. and that's "nightly business report" for tuesday, march 15. we want to remind you this is the time of year your public television station seeks your support-- support that makes programs like "nightly business report" possible. again, thanks for joining us. i'm susie gharib. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:
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